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July 12, 2022

Roe v. Wade Overturned: Here’s How it Impacts Employee Healthcare Benefits

On June 24, the U.S. Supreme Court upheld Mississippi’s restrictions on abortion in Dobbs v. Jackson Women’s Health Organization (“Dobbs”). The decision overturns the Roe v. Wade (1973) and Planned Parenthood v. Casey (1992) decisions that pre-empted state restrictions on abortion. In light of the Dobbs ruling, some employers have announced plans to revise their employee healthcare benefits to cover travel expenses for legal abortion procedures not available nearby.

Watch and read below to learn what the ruling means for employee healthcare benefits, what type of assistance employers can provide as it relates to legal abortions, and frequent questions regarding employee benefits. 

Video: Explanation of Ruling and What Happens Next 

Abortion Travel Eligibility

Abortion travel is considered “medical care” for purposes of Code section 213(d). As long as the abortion is obtained in a jurisdiction where the abortion is legal, it is considered “medical care.” Medical care under Code section 213(d) includes “amounts for transportation primarily for and essential to” medical care. The medical care itself has to be legal in order for the tax favored treatment to apply. Travel for an abortion obtained in a state where the procedure is illegal would not qualify.

Medical Travel Expenses and Limits 

There are limits for medical travel reimbursement under this Code section. 

HSA, FSA, and HRA Eligibility 

Abortion travel can be reimbursed through a health reimbursement arrangement (HRA) or flexible spending account (FSA), subject to the rules which govern these accounts. Abortion travel can also be reimbursed through a health savings account (HSA). The HSA account holder is responsible for maintaining their own records to show that their expenses are qualified medical expenses since the employer plays no role in substantiating HSA distributions.

FSA, HSA and HRAs may also be used to purchase abortion pills either by prescription or over the counter.

ERISA and State Law Compliance and HIPAA Considerations 

Fully-insured plans are subject to the laws of the state in which the employer or the plan resides. For instance, if the fully-insured plan resides in Texas, and Texas’ trigger law to ban abortions after a fetal heartbeat is detected goes into effect, the plan is subject to that Texas law. 

For self-insured plans, state law does not apply and is preempted by federal law. If an employer has a fully-insured health plan and wants to offer this travel benefit, then they may want to set up a separate self-funded plan. In this case, the employer will need a separate plan document for the self-funded plan. This is mainly for small employers who currently have fully-insured plans and want to offer this travel benefit within a self-funded plan to ensure the plan is not subject to certain state laws.

It is also important to consider HIPAA concerns. HIPAA only has one definition of what PHI and ePHI is, with 18 identifiers. Most agree that abortion-related PHI is sensitive and there will be the usual HIPAA concerns and duties on the party who is the plan sponsor and plan administrator.

Updates out of DC

President Biden and the administration has stated he would seek to codify Roe’s protection through federal legislation and is using the midterm elections to do this.

Senate Majority Leader Schumer introduced legislation that would codify Roe, but on May 11, 2022, the bill failed to reach the 60 votes needed to move the bill forward. This was before the opinion was published and was introduced only when the opinion was leaked, so we expect to see more bills filed which will attempt to do the same now that the Supreme Court opinion has been published.

Senator Rubio introduced a bill which would bar employers from getting any tax write-off for covering the cost of workers traveling to get an abortion. This has not yet moved forward.

We do expect to see bills addressing a spectrum of abortion-related issues come out now that the decision has been published.

Frequently Asked Questions

Question: We have several clients in states that 1) ban all abortions, 2) have trigger laws that will ban abortions in 1 month, and 3) are likely to ban abortions soon once their trigger laws are no longer held up in state court. How can those clients in those states cover travel expenses for employees to travel to a state where abortion is not banned?

Answer: Employers can reimburse travel expenses incurred by employees and/or spouses and dependents on a pre-tax basis through an employer-sponsored health plan so long as the expense qualifies as an eligible 213(d) medical expense. The Tax Code treats certain travel expenses, including transportation and lodging, which are incurred primarily for and essential to obtaining medical care, as eligible 213(d) medical expenses. This means they can be paid for by group health plans, including reimbursement through a health flexible spending account (FSA), health reimbursement arrangement (HRA), and/or health savings account (HSA), on a pre-tax basis. 

Example: An employee lives in Texas where they are banning all abortions within one month because of a trigger law. The employee calls a doctor in Colorado, where abortion is not banned, makes an appointment, and drives to Colorado to receive the procedure. The employee can use an FSA to pay for the travel expense as long as the employer hasn’t built in any guardrails not allowing this valid 213(d) expenses.

Question: Can employers cover travel expenses on a post-tax basis?

Answer: Employers can cover abortion-related travel expenses on a post-tax basis (for those clients not interested in offering FSA/HSA/HRA benefits). If the benefit is designed as a program established to pay for travel expenses incurred primarily for essential to medical care, it could trigger status as an employer-sponsored group health plan subject to laws such as ERISA and COBRA.

Question: How does this impact ERISA-governed plans? 

Answer: ERISA-governed plans are shielded from most state laws that would change the benefits provided by the plan or the way the plan is administered. Thus, ERISA preemption generally allows ERISA plans to operate exclusively under federal law as opposed to having to comply with patchwork state laws.

To the extent a state law would require the plan sponsor to amend its benefits plan to exclude or limit coverage of abortions, ERISA preemption would block that state law’s application to the plan. While ERISA preemption does apply to plans, it is VERY important that employers only act as a group health plan and not as a counselor here because acting as anything but a plan sponsor could waive ERISA preemption protection.

While ERISA’s preemption shield might prohibit a state from directly dictating to a group health plan whether it can cover abortion, states do have the right to dictate to insurance companies supplying insured coverage whether those companies must (or must not) cover certain procedures. ERISA specifically states that its exemption powers do not extend to any law of any state which regulates insurance. As such, when employer plan sponsors purchase a group insurance policy through a state-licensed carrier (as opposed to offering self-insured coverage), that policy comes with state-imposed mandates and restrictions. So here, it matters if the plan is self-funded or fully insured, along with what state they are in.

Self-funded ERISA plans are not regulated by insurance and therefore have the protection of ERISA preemption.

It’s also important to remember that most government and church groups are NOT covered by ERISA and therefore cannot claim ERISA preemption, which means they would likely be subject to state law, including those state laws related to abortion.

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